The US PPI and German and Italian CPI on Friday were all negative.
This highlights the still clear and present danger of deflation that grips a large part of the developed world faces and increases the likelihood that the ECB will eventually take the option it has given itself and begin buying bonds -regardless of what the Germans, and others, think.
Counterbalancing this – and why Euro was steady but Sterling rose – is the fact that the negative print in the US likely forestalls the time until the fed actually starts to hike rates.
So its GBPUSD which is trying to break up and through multi-year highs as expectations grow that the BoE will soon be raising rates.
Indeed the BoE decision cut and minutes this week will be very important.
Anyway back to other news Friday and stocks had another win on Friday after two days under pressure. The Dow rose 41 for a gain of 0.25% to 16,776. The Nasdaq was up 0.3% to 4,311 while the S&P 500 finished up 1,936 also for a gain of 0.3%.
In Europe stocks lost momentum with the FTSE down 0.95% for its third daily loss and a break out of the May range. Further losses seem likely. In Frankfurt the DAX lost 0.26% and the CAC lost 0.25%. In Milan stocks hardly budged while in Madrid the market rose 0.23%.
On global bond markets the UK sell off continued with 10 years rising another 3 points to 2.75%. A loss of 1.12% in capital value which helps explain some of the FTSE’s weakness. In the US rates rose 1 point to 2.61% while on the continent the German and Italian CPI prints of -0.1% for May helped drive rates lower with Bunds down 2 to 1.37%, while Italian and Spanish 10 years fell 3 and 4 points respectively to 2.79% and 2.66%.
So the wash up of all of this is that the ASX looks set for a fairly flat open with SPI June futures up 1 point to 5405 with September futures up 4. The iron ore price was down again however so we’ll see the impact on the miners in trade today. On the Bonds the September 3′s rose a point to 97.105 (2.895) while the 10′s rose 1.5 points to 96.215 (3.885%).
On currency markets the Aussie has slipped back below 94 cents to 0.9390 this morning after rejecting the old trend line on Friday.
The Euro sits at 1.3537 while sterling traded above 1.70 for a time last week before falling Back below the figure and it sits at 1.6970 this morning in early Asian trade. USDJPY is back just above 102 at 102.05.
On commodities iron ore September futures fell another 50 cents a tonne to $90.08 while Newcastle Coal for September rose 30 cents to $72.85 tonne. Nymex June crude leapt above $107 Bbl at one point before falling back but still ended up 0.36% to $106.77. Eyes remain on Iraq. Gold sits at $1,274 with copper at $3.03 lb as traders continue to eye corruption and collateral probes in China. On the Ags corn was up 0.68% after traders bet that the crop forecasts were too optimistic. Soybeans rose 0.74% and wheat was up 0.13%.
On the data front today it is quiet in Asia before the EU CPI data and New York Empire Manufacturing, industrial production and NAHB housing market index are released in the US.